Economic Outlook for Peru

By Marco Aquino

LIMA (Reuters) – Peru’s central bank anticipates that the Andean nation’s economy will grow 3.1% in 2023 and 3.0% in 2025, as stated in a recent report, maintaining a positive outlook following a 0.6% GDP contraction last year.

Central bank chief Julio Velarde indicated that this 3.1% growth expectation might be “probably biased to the upside”.

Fiscal Deficit Forecasts

The bank has updated its fiscal deficit forecasts to 3.3% of GDP for this year, up from 2.8%, and 2.0% for next year, revised from 1.6%. Velarde attributed these revisions to falling revenue and increased public investment.

Peru has implemented a guideline to keep the deficit below 2.8% of GDP this year.

Support for Petroperu

Velarde highlighted government assistance for the struggling state oil company, Petroperu, which received approval for an additional $1.75 billion in financing following the resignation of its directors. This financial support for Petroperu is estimated to amount to 0.66% of GDP for this year.

Trade Surplus and Inflation

The monetary authority projects a $21.67 billion trade surplus in 2023, slightly below earlier estimates, yet still anticipating a new record, despite falling copper prices amid diminishing demand from China.

The central bank has also marginally increased its inflation forecast from 2.2% to 2.3%, which remains within its target range. Recently, the bank cut its benchmark rate by 25 basis points to 5.25%.

Government Predictions

The government expects the economy to expand by 3.2% this year and 3.1% in 2025.

In July, the economy experienced growth of nearly 4.5%, marking the fourth consecutive month of expansion as it continued to recover from adverse weather conditions and anti-government protests that impacted the mining industry last year.

Peru, as a significant global copper supplier, is also facing extensive forest fires that have damaged farmland and impacted archaeological sites.